Economic activity in the manufacturing sector expanded in September for the 26th consecutive month, and the overall economy grew for the 28th consecutive month, say the nation’s supply executives in the latest Manufacturing edition of the Institute for Supply Management (ISM) “Report On Business.”

Bradley J. Holcomb, chair of the Institute for Supply Management Manufacturing Business Survey Committee, issued the report today. “The PMI registered 51.6%, an increase of 1 percentage point from August, indicating expansion in the manufacturing sector for the 26th consecutive month, at a slightly higher rate,” he said. “The Production Index registered 51.2% indicating a return to growth after contracting in August for the first time since May of 2009. The New Orders Index remained unchanged from August at 49.6%, indicating contraction for the third consecutive month. The Backlog of Orders Index decreased 4.5 percentage points to 41.5%, contracting for the fourth consecutive month and reaching its lowest level since April 2009, when it registered 40.5%. Comments from respondents generally reflect concern over the sluggish economy, political and policy uncertainty in Washington, and forecasts of ongoing high unemployment that will continue to put pressure on demand for manufactured products.”

Manufacturing continued its growth in September as the PMI registered 51.6%, an increase of 1 percentage point when compared to August’s reading of 50.6%. A reading above 50% indicates that the manufacturing economy is generally expanding; below 50% indicates that it is generally contracting.

A PMI in excess of 42.5%, over a period of time, generally indicates an expansion of the overall economy. Therefore, the PMI indicates growth for the 28th consecutive month in the overall economy, as well as expansion in the manufacturing sector for the 26th consecutive month.

Holcomb said, “The past relationship between the PMI and the overall economy indicates that the average PMI for January through September (56.2%) corresponds to a 4.8% increase in real gross domestic product (GDP). In addition, if the PMI for September (51.6%) is annualized, it corresponds to a 3.2% increase in real GDP annually.”

ISM’s New Orders Index registered 49.6% in September, which represents the same rate as in August. This is the third consecutive month of contraction in the New Orders Index, following 24 months of growth. A New Orders Index above 52.1%, over time, is generally consistent with an increase in the Census Bureau’s series on manufacturing orders (in constant 2000 dollars).

ISM’s Production Index registered 51.2% in September, which is an increase of 2.6 percentage points when compared to the August reading of 48.6%, and a return to growth following one month of contraction. An index above 51%, over time, is generally consistent with an increase in the Federal Reserve Board’s Industrial Production figures.

ISM’s Employment Index registered 53.8% in September, which is 2 percentage points higher than the 51.8% reported in August. An Employment Index above 50.1%, over time, is generally consistent with an increase in the Bureau of Labor Statistics (BLS) data on manufacturing employment.

The delivery performance of suppliers to manufacturing organizations was slower in September as the Supplier Deliveries Index registered 51.4%, which is 0.8 percentage point higher than the 50.6% registered in August. This is the 28th consecutive month the Supplier Deliveries Index has been above 50%. A reading above 50% indicates slower deliveries.

The Inventories Index registered 52% in September, 0.3 percentage point lower than the 52.3% reported in August. An Inventories Index greater than 42.7%, over time, is generally consistent with expansion in the Bureau of Economic Analysis’ (BEA) figures on overall manufacturing inventories (in chained 2000 dollars).

The ISM Customers’ Inventories Index registered 49% in September, 2.5 percentage points higher than in August when the index registered 46.5%. This is the 30th consecutive month the Customers’ Inventories Index has been below 50%, indicating that respondents believe their customers’ inventories are too low at this time.

ISM’s Backlog of Orders Index registered 41.5% in September, which is 4.5 percentage points lower than the 46% reported in August. Of the 86% of respondents who reported their backlog of orders, 15% reported greater backlogs, 32% reported smaller backlogs, and 53% reported no change from August.

ISM’s New Export Orders Index registered 53.5% in September, which is 3 percentage points higher than the 50.5% reported in August. This is the 27th consecutive month of growth in the New Export Orders Index.

Imports of materials by manufacturers continued to expand in September as the Imports Index registered 54.5%, 1 percentage point lower than the 55.5% reported in August. This is the 25th consecutive month of growth in imports.

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